Interbank rates rises as CBN enforces CRR hike

The Nigerian Interbank Offered Rates (NIBOR) increased significantly to an average of 14.68 per cent yesterday as the Central Bank of Nigeria (CBN) enforced the 75 per cent Cash Reserve Requirement (CRR) on public sector deposits in banks.

The development had been predicted by most financial market analysts.
It was gathered that the central bank withdrew about N750 billion from the banking system as a result of the monetary policy measure.

Consequently, data gathered from the FMDQ OTC showed that while the Call tenor jumped to 13.75 per cent yesterday, from 10.50 per cent the previous day, the 7-day tenor also climbed to 13.92 per cent yesterday, from 10.83 per cent.

Similarly, while the 30-day tenor closed higher at 14.33 per cent yesterday, from 11.37 per cent on Tuesday, the 60-day tenor also increased to 14.67 per cent, from 11.75 per cent. The 90-day, 180-day and 365-day tenors all closed higher at 15.08 per cent, 15.37 per cent and 15.67 per cent respectively.

The central bank’s Monetary Policy Committee (MPC) had at its meeting a fortnight ago raised the CRR for banks to hold government sector deposits to 75 per cent, from 50 percent, in a bid to tighten liquidity and support the naira.

However, Reuters revealed that fund providers were quoting higher rates on short tenor placements early yesterday as they anticipated the sterilisation of funds by the central bank to tighten liquidity before the close of market.

"Rates have suddenly jumped because of the signal to debit banks' accounts, though the money is yet to be debited," one dealer told Reuters.

Meanwhile, the central bank in a circular titled: “Guidelines for the Operations of the Foreign Exchange Market –Retail Dutch Auction System (RDAS),” obtained on its website yesterday notified authorised dealers that a designated account name has been opened in the CBN for forex transactions.

The regulator therefore urged the dealers to fund the account (inclusive of one per cent commission) using the RTGS, by the close of business every Thursday for Monday auction session, saying that funding for Wednesday session should be done on Mondays.

“Funds in respect of disqualified or cancelled bids and any balances shall be credited to the current account of the authorised dealer by the end of the auction session. Please note that this requirement comes into effect as from the RDAS auction holding on Monday. 10th February 2014,” the circular signed on behalf of the Director, Trade and Exchange Department, CBN, by N.T. Igba, added.